Noble Energy Announces Third Quarter 2009 Results

Press Release

Oct 29, 2009
Noble Energy Announces Third Quarter 2009 Results

HOUSTON, Oct 29, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Noble Energy, Inc. (NYSE:NBL) reported today third quarter 2009 net income of $107 million, or $0.61 per share diluted, on revenues of $621 million. The results were reduced by certain items totaling $86 million after-tax, the largest of which was a previously disclosed unrealized commodity derivative loss. Excluding these items, which are typically not considered by analysts in published estimates, third quarter 2009 adjusted net income(1) was $193 million, or $1.10 per share diluted. For the third quarter of 2008, net income was $974 million, or $5.37 per share diluted, on revenues of $1.1 billion. Adjusted net income(1) for the same period was $395 million, or $2.08 per share diluted.

Discretionary cash flow(1) for the third quarter 2009 was $499 million, compared to $657 million for the similar quarter in 2008. Net cash provided by operating activities was $488 million and capital expenditures were $224 million.

Key highlights for the third quarter 2009 include:

    --  Ticonderoga in the deepwater Gulf of Mexico returned to full production
    --  Approved Isabela/Santa Cruz oil development project in the deepwater
        Gulf of Mexico
    --  Record Wattenberg production of 283 million cubic feet equivalent per
        day, including liquid volumes of 22 thousand barrels per day
    --  Completed first horizontal East Texas Haynesville shale well with
        initial 30-day average production rate of over 11 million cubic feet per
        day, gross
    --  Sanctioned Aseng oil development project in Block 'I' offshore
        Equatorial Guinea

    --  Executed an additional gas sales agreement in Israel which raised
        average natural gas prices by over 40 percent from the previous quarter

"Noble Energy reported very strong results for the quarter with sales volumes up and costs down versus the second quarter this year and the third quarter of 2008. Our diverse product mix, combined with strengthening global liquid prices and record realizations in Israel, were certainly key contributors," said Charles D. Davidson, Noble Energy's Chairman and CEO.

Mr. Davidson went on to say, "Initial results from our Texas Haynesville drilling program are very positive, and we anticipate more results in the near future. In addition, we look forward to resuming our deepwater Gulf of Mexico exploration program with drilling to start on two significant tests at Deep Blue and Double Mountain in the fourth quarter. We also made important progress on our long-term growth projects, sanctioning oil projects at Aseng and Isabela/Santa Cruz and moving forward the development plans at Tamar offshore Israel. Our financial and operating results for the quarter provide us with a lot of momentum as we approach the end of the year."

Total sales volumes averaged 217 thousand barrels of oil equivalent per day for the quarter, up three percent from the third quarter of 2008 primarily as a result of increased volumes in the United States and West Africa. Domestically, higher volumes were supported by ongoing development activity at Wattenberg, the return to full production of Ticonderoga, and the impact of the Raton gas project in the deepwater Gulf of Mexico. Greater natural gas volumes in West Africa were largely related to a lesser amount of facility maintenance downtime. North Sea volumes were down from the third quarter 2008 mainly due to Dumbarton performance.

Commodity price realizations for the quarter were down from the similar period last year. The Company's global crude oil and natural gas prices averaged $63.36 per barrel and $2.41 per thousand cubic feet during the third quarter 2009. Third quarter 2009 crude oil realizations were reduced $1.89 and $5.32 per barrel in the United States and West Africa, respectively, as a result of previously deferred hedge losses.

Cash costs, including lease operating, production and ad valorem taxes, transportation, and G&A were $9.22 per barrel of oil equivalent (Boe) for the quarter versus $11.44 per Boe for the same period in 2008. Lease operating expenses (LOE) averaged $4.41 per Boe, down 13 percent from the third quarter of 2008. The majority of the variance in LOE related to continued cost cutting measures, fewer workover activities onshore in the U.S., and reduced process handling fees in the deepwater Gulf of Mexico. Production taxes significantly declined as a result of lower realized commodity prices. G&A expenses also decreased from the prior period related mostly to incentive compensation. In addition, exploration expense was down from the third quarter of 2008 due to continued drilling success and lower seismic expenditures.

(1) A Non-GAAP measure, see attached Reconciliation Schedules

CONFERENCE CALL

Noble Energy's third quarter 2009 conference call will be available today via live audio webcast at 9:00 a.m. Central Time. To listen, log on to www.nobleenergyinc.com and click on the Investors tab and go to the Investors Events link. Dial in numbers are (888) 437-9276 or (719) 325-2361. The conference call replay will be available on the website until November 30, 2009.

Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company operates primarily in the Rocky Mountains, Mid-Continent, and deepwater Gulf of Mexico areas in the United States, with significant international operations offshore Israel and West Africa. Noble Energy is listed on the New York Stock Exchange and is traded under the ticker symbol NBL. Visit Noble Energy online at www.nobleenergyinc.com.

This news release may include projections and other "forward-looking statements" within the meaning of the federal securities laws. Any such projections or statements reflect Noble Energy's current views about future events and financial performance. No assurances can be given that such events or performance will occur as projected, and actual results may differ materially from those projected. Risks, uncertainties and assumptions that could cause actual results to differ materially from those projected include, without limitation, the volatility in commodity prices for crude oil and natural gas, the presence or recoverability of estimated reserves, the ability to replace reserves, environmental risks, drilling and operating risks, exploration and development risks, competition, government regulation or other action, the ability of management to execute its plans to meet its goals and other risks inherent in Noble Energy's business that are detailed in its Securities and Exchange Commission filings. Words such as "anticipates," "believes," "expects," "intends," "will," "should," "may," and similar expressions may be used to identify forward-looking statements. Noble Energy assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law.

This news release may also contain certain forward-looking non-GAAP measures of financial performance that management believes are good tools for internal use and the investment community in evaluating the company's overall financial performance. These non-GAAP measures are broadly used to value and compare companies in the crude oil and natural gas industry.


                               Schedule 1
                           Noble Energy, Inc.
       Reconciliation of Net Income (Loss) to Adjusted Net Income
           (in millions, except per share amounts, unaudited)


                                         Three Months    Nine Months
                                            Ended           Ended
                                         September 30,   September 30,
                                         ------------    -------------
                                         2009   2008      2009    2008
                                         ----   ----      ----    ----

    Net Income (Loss)                    $107   $974     $(139) $1,045

      Adjustments, net of tax (1)
        Unrealized (gains) losses on
         commodity derivative
         instruments                       81   (637)      302      (7)
        Gain on sale of Argentina
         assets                             -      -       (14)      -
        Asset impairments (2)               -     26       259      25
        Allowance for SemCrude
         receivable                         5     26         5      25
        Other adjustments, net              -      6        (1)      6
                                          ---    ---        --     ---

    Adjusted Net Income (3)              $193   $395      $412  $1,094
                                         ----   ----      ----  ------

    Adjusted Earnings Per Share
      Basic                             $1.11  $2.29     $2.38   $6.35
      Diluted                            1.10   2.08      2.35    6.14

    Weighted average number of
     shares outstanding
      Basic                               173    173       173     172
      Diluted (4)                         175    176       175     176


    (1) The net tax effects are determined by calculating the tax provision
    for GAAP Net Income (Loss), which includes the adjusting items, and
    comparing the results to the tax provision for Adjusted Net Income, which
    excludes the adjusting items. The difference in the tax provision
    calculations represents the tax impact of the adjusting items listed here.
    The calculation is performed at the end of each quarter and, as a result,
    the tax rates for each discrete period are different.

    (2) The 2009 impairments were recorded in the first quarter and were
    predominantly related to Granite Wash.

    (3) Adjusted net income should not be considered a substitute for net
    income as reported in accordance with GAAP.  Adjusted net income is
    provided for comparison to earnings forecasts prepared by analysts and
    other third parties. Our management believes, and certain investors may
    find, that adjusted net income is beneficial in evaluating our financial
    performance.

    (4) The adjusted diluted earnings per share calculation for the nine
    months ended September 30, 2009 includes an increase to diluted shares of
    approximately 2 million shares representing the incremental dilutive
    shares that were anti-dilutive, for GAAP purposes, and therefore excluded
    from the calculation of GAAP net loss per share for the nine months ended
    September 30, 2009.



                                   Schedule 2
                               Noble Energy, Inc.
                         Summary Statement of Operations
               (in millions, except per share amounts, unaudited)


                                                Three Months   Nine Months
                                                   Ended          Ended
                                                September 30,  September 30,
                                                -------------  -------------
                                                 2009  2008    2009    2008
                                                 ----  ----    ----    ----
    Revenues
      Crude oil and condensate                   $377  $629    $876  $1,830
      Natural gas                                 172   361     498   1,132
      NGLs                                         24    50      66     153
      Income from equity method investees          25    40      52     158
      Other revenues                               23    18      61      55
                                                   --    --      --      --
        Total revenues                            621 1,098   1,553   3,328
                                                  --- -----   -----   -----
    Operating Expenses
      Lease operating expense                      88    98     281     268
      Production and ad valorem taxes              25    47      66     141
      Transportation expense                       18    14      43      43
      Exploration expense                          27    39     102     181
      Depreciation, depletion and amortization    205   194     601     593
      General and administrative                   53    63     173     184
      Asset impairments                             -    38     437      38
      Other operating expense, net                 34    60      22     107
                                                   --    --      --     ---
        Total operating expenses                  450   553   1,725   1,555
                                                  ---   ---   -----   -----
    Operating Income (Loss)                       171   545    (172)  1,773
    Other (Income) Expense
      (Gain) Loss on commodity derivative
       instruments                                 28  (875)     95     190
      Interest, net of amount capitalized          23    18      64      52
      Other expense (income), net                   5   (52)     18     (42)
                                                   --   ---      --     ---
        Total other (income) expense               56  (909)    177     200
                                                   --  ----     ---     ---
    Income (Loss) Before Taxes                    115 1,454    (349)  1,573
    Income Tax Provision (Benefit)                  8   480    (210)    528
                                                  ---   ---    ----     ---
    Net Income (Loss)                            $107  $974   $(139) $1,045
                                                 ----  ----   -----  ------

    Earnings (Loss) Per Share
      Basic                                     $0.62 $5.64  $(0.80)  $6.06
      Diluted                                    0.61  5.37   (0.80)   5.86

    Weighted average number of shares
     outstanding
      Basic                                       173   173     173     172
      Diluted                                     175   176     173     176



                                    Schedule 3
                                Noble Energy, Inc.
                            Volume and Price Statistics
                                    (unaudited)

                                                   Three Months   Nine Months
                                                       Ended        Ended
                                                   September 30, September 30,
                                                   ------------- -------------
                                                    2009    2008   2009   2008
                                                    ----    ----   ----   ----
    Crude Oil and Condensate Sales Volumes (MBpd)
      United States                                   39      38     37     41
      West Africa                                     14      14     14     15
      North Sea                                        8      12      7     10
      Other International                              4       3      4      4
                                                      --      --     --     --
        Total consolidated operations                 65      67     62     70
      Equity method investee                           2       2      2      2
                                                      --      --     --     --
        Total sales volumes                           67      69     64     72
                                                      --      --     --     --
    Crude Oil and Condensate Realized Prices
     ($/Bbl)
      United States                               $62.30  $93.47 $50.45 $87.84
      West Africa                                  63.10  109.90  51.94 103.31
      North Sea                                    69.56  117.44  57.61 114.42
      Other International                          62.75  106.03  49.76  73.37
                                                   -----  ------  -----  -----
        Consolidated average realized prices      $63.36 $101.82 $51.55 $78.89
                                                  ------ ------- ------ ------

    Natural Gas Sales Volumes (MMcfpd)
      United States                                  397     384    401    393
      West Africa                                    228     194    238    212
      North Sea                                        5       6      5      6
      Israel                                         144     155    117    140
      Other International                             28      21     24     22
                                                      --      --     --     --
        Total sales volumes                          802     760    785    773
                                                     ---     ---    ---    ---
    Natural Gas Realized Prices ($/Mcf)
      United States                                $3.05   $8.48  $3.36  $9.10
      West Africa                                   0.27    0.27   0.27   0.27
      North Sea                                     4.63   11.54   5.94  10.62
      Israel                                        3.95    3.57   3.27   3.15
      Other International                              -       -      -      -
                                                     ---     ---    ---    ---
        Average realized prices                    $2.41   $5.31  $2.40  $5.50
                                                   -----   -----  -----  -----

    Natural Gas Liquids (NGL) Sales Volumes
     (MBpd)
      United States                                   10      10     10     10
      Equity method investee                           6       5      6      6
                                                      --      --     --     --
        Total sales volumes                           16      15     16     16
                                                      --      --     --     --
    Natural Gas Liquids Realized Prices
     ($/Bbl)
      United States                               $25.39  $57.06 $24.70 $57.39

    Barrels of Oil Equivalent Volumes (MBoepd)
      United States                                  115     111    113    117
      West Africa                                     52      47     54     50
      North Sea                                        9      13      8     11
      Israel                                          24      26     20     23
      Other International                              9       7      8      8
                                                      --      --     --     --
        Total consolidated operations                209     204    203    209
      Equity method investee                           8       7      8      8
                                                      --      --     --     --
        Total barrels of oil equivalent (MBoepd)     217     211    211    217
                                                     ---     ---    ---    ---
        Barrels of oil equivalent volumes (MMBoe)     20      19     58     59
                                                      --      --     --     --



                                  Schedule 4
                              Noble Energy, Inc.
                           Condensed Balance Sheets
                                (in millions)

                                                    (unaudited)
                                                   September 30, December 31,
                                                  -------------- ------------
                                                        2009         2008
                                                        ----         ----
    Assets
      Current Assets
        Cash and cash equivalents                       $926       $1,140
        Accounts receivable, net                         348          423
        Commodity derivative assets                       96          437
        Other current assets                             130          158
                                                         ---          ---
          Total current assets                         1,500        2,158
      Net property, plant and equipment                8,896        9,004
      Goodwill                                           758          759
      Other noncurrent assets                            481          463
                                                         ---          ---
          Total Assets                               $11,635      $12,384
                                                     -------      -------

    Liabilities and Shareholders' Equity
      Current Liabilities
        Accounts payable - trade                        $397         $579
         Other current liabilities                       449          595
                                                         ---          ---
            Total current liabilities                    846        1,174
      Long-term debt                                   2,161        2,241
      Deferred income taxes                            1,905        2,174
      Other noncurrent liabilities                       565          486
                                                         ---          ---
            Total Liabilities                          5,477        6,075

        Total Shareholders' Equity                     6,158        6,309
                                                       -----        -----
            Total Liabilities and Shareholders'
             Equity                                  $11,635      $12,384
                                                     -------      -------



                               Schedule 5
                           Noble Energy, Inc.
      Discretionary Cash Flow and Reconciliation to Operating Cash
                                   Flow
                        (in millions, unaudited)


                                       Three Months       Nine Months
                                           Ended            Ended
                                       September 30,     September 30,
                                       -------------     -------------
                                        2009   2008      2009    2008
                                        ----   ----      ----    ----

    Adjusted Net Income (1)             $193   $395      $412  $1,094
    Adjustments to reconcile net
     income to discretionary cash flow:
      Depreciation, depletion and
       amortization                      205    194       601     593
      Exploration expense                 27     38       102     181
      Interest capitalized               (12)    (7)      (30)    (23)
      (Income) / distributions from
       equity method investments, net      7     31       (15)     34
      Deferred compensation adjustment     7    (47)       18     (25)
      Deferred income taxes               51     81        96     199
      Stock-based compensation expense    13     10        37      30
      Settlement of previously
       recognized hedge losses (2)         -    (43)        -    (144)
      Other, net                           8      5        (8)     20
                                          --     --        --      --
    Discretionary Cash Flow (3)         $499   $657    $1,213  $1,959
                                        ----   ----    ------  ------

    Reconciliation to Operating Cash
     Flows
      Net changes in working capital      62    281        11      (9)
      Cash exploration costs             (25)   (29)      (91)   (103)
      Capitalized interest                12      7        30      23
      Current tax benefit (expense) of
       net income adjustments            (60)  (196)     (136)      -
      Gain on disposal of assets           -      -       (24)      -
      Other adjustments                    -     (7)      (17)     (3)
                                         ---     --       ---      --
    Net Cash Provided by Operating
     Activities                         $488   $713      $986  $1,867
                                        ----   ----      ----  ------

    Capital Expenditures, accrual
     based                              $224   $786      $933  $1,832

    (1) See Schedule 1, Reconciliation of Net Income (Loss) to Adjusted Net
    Income.

    (2) See Schedule 6, Effect of Derivative Instruments.

    (3) The table above reconciles discretionary cash flow to net cash
    provided by operating activities. While discretionary cash flow is not a
    GAAP measure of financial performance, our management believes it is a
    useful tool for evaluating our overall financial performance. Among our
    management, research analysts, portfolio managers and investors,
    discretionary cash flow is broadly used as an indicator of a company's
    ability to fund exploration and production activities and meet financial
    obligations. Discretionary cash flow is also commonly used as a basis to
    value and compare companies in the oil and gas industry.



                                    Schedule 6
                                Noble Energy, Inc.
                    Effect of Commodity Derivative Instruments
                             (in millions, unaudited)

                                                  Three Months   Nine Months
                                                      Ended         Ended
                                                  September 30,  September 30,
                                                  -------------  -------------
                                                    2009  2008   2009   2008
                                                    ----  ----   ----   ----
    Reclassification from Accumulated Other
      Comprehensive Loss (AOCL) to Revenue (1)
      Crude oil                                     $(14) $(89)  $(45) $(279)
      Natural gas                                      -    (4)     -     31
                                                     ---    --    ---     --
    Total Revenue Decrease                          $(14) $(93)  $(45) $(248)
                                                    ----  ----   ----  -----

    Gain (Loss) on Derivative Instruments
      Crude oil
          Realized                                   $50  $(61)  $212  $(140)
          Unrealized                                 (34)  559   (305)  (121)
                                                     ---   ---   ----   ----
            Total crude oil                           16   498    (93)  (261)
                                                      --   ---    ---   ----
      Natural gas
          Realized                                    71    (7)   201    (59)
          Unrealized                                (115)  384   (203)   130
                                                    ----   ---   ----    ---
            Total natural gas                        (44)  377     (2)    71
                                                     ---   ---     --     --
    Total Gain (Loss) on Derivative Instruments     $(28) $875   $(95) $(190)
                                                    ----  ----   ----  -----

    Summary of Cash Settlements
    Cash settlements (received) paid               $(107) $204  $(368)  $591
    Realized gain (loss) on derivative
     instruments                                     121   (68)   413   (199)
    Amounts reclassified from AOCL                   (14)  (93)   (45)  (248)
                                                     ---   ---    ---   ----
    Settlement of previously recognized hedge
     losses                                           $-   $43     $-   $144
                                                      --   ---     --   ----

    (1) The amounts in AOCL represent deferred unrealized hedge gains and
    losses.  Upon settlement, these deferred gains and losses are
    reclassified from AOCL to net income as increases or decreases to crude
    oil and natural gas revenues, and impact reported realized commodity
    prices.

SOURCE Noble Energy, Inc.

http://www.nobleenergyinc.com

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